In the knowledge-based era, IC has taken place of physical assets as the primary need of the

various organizations. Some studies point out that a company’s intangible assets are the main
propellers of organizational performance (Forte et al., 2017). According to Roos (2005), business
resources comprise of 20% tangible value and 80% intangible value. This has caused a gap
between the market and book value of companies and IC may be considered as the gap in value
unseen in financial displays (Clarke et al., 2011). Rylander et al. (2000) report the gap being
prominent in high-tech industries and other knowledge intensive industries.

These limitations in performance measurement have prompted firms to realize that instead of
production of material goods, creation of IC is a pivotal source of economic value (Chen et al.,
2005). For example, firms like Walt Disney, H.J. Heinz, Johnson and Johnson, and Merck have
their market value more than four times its tangible asset base – these firms have successfully
transitioned to a knowledge economy by recognizing the critical role IC plays in innovative
product design, production, distribution and promotion (Bose and Thomas, 2007). Edvinsson
(1997) also believe that in the knowledge economy era, good management of intellectual may
transform knowledge as property.

These findings have necessitated for a quick need to identify IC, or intangibles in a firm’s
financial reports (Mehri et al., 2013). An increased amount of research has revealed the
importance of IC on corporate performance (Chen et al., 2005; Tan et al., 2007). This paper
seeks to extend the topic of IC into the software industry, specifically the United States (US)
multinational software firms between 2012 and 2016. This industry is of interest because
performance heavily relies on new technological innovation in the marketplace (Ng, 2006). The
explosive growth rate of the technology industry is largely driven by the software sector, which
has continued to undergo rapid restructuring with the US being the largest tech market in the
world, representing 31% of the global market share (CompTIA, 2019). Moreover, in recent
years, many companies started going mainstream with the internet of Things (IoT) and
integrating to cloud computing system within their IT infrastructures (CompTIA, 2019).